Stocks Fall, Bonds and Gold Gain as Russia Threats to Fed Tensions Increase

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LONDON (Reuters) – Stocks fell while safe havens such as government bonds and the dollar rose as anxious investors fled risky assets after Russian President Vladimir Putin on Wednesday ordered a mobilization over Ukraine and accused the West of “nuclear blackmail”. .

European currencies came under heavy criticism, with the euro dropping 0.4% to $0.9932, and the British pound shedding 0.3% last time at $1.1346, after touching a new 37-year low at $1.1304.

After the initial pullback in the wake of Putin’s comments, European stock markets pared losses, leaving the STOXX (.STOXX) index with a 0.4% gain on the day, buoyed by a rise in oil and gas stocks, which responded to the jump in energy prices.

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US stock index futures are higher, indicating a slightly stronger start to the day on Wall Street later (.SPX).

The dollar index, which measures the performance of the greenback against six major peers, rose 0.32% to 110.52, after touching its highest level in two decades at 110.87.

With the US Federal Reserve set to raise interest rates again later in the day, in a week filled with key central bank decisions, key market measures of volatility are close to multi-week highs. (.VIX), (.V2TX)

“There will be more of a trip to safety,” said Susanna Streeter, senior investment and markets analyst at Hargreaves Lansdown. “We are likely to see the dollar gain strength again. I think there will be an uptick in money that might provide safety,” he said.

Putin said he signed a decree on partial mobilization from Wednesday, saying he is defending Russian territory and that the West wants to destroy the country. Read more

“If the territorial integrity of our country is threatened, we will use all available means to protect our people – this is not a hoax,” Putin said in a televised address to the nation, adding that Russia has “a lot of weapons to respond.”

“It’s a fact that he decided to do away with a nuclear card flick that clearly didn’t go well, and the euro was already feeling the effects of that as well,” said Michael Hewson, chief markets strategist at CMC Markets in London. .

Stocks were already under pressure due to tensions over an upcoming policy decision by the Federal Reserve, which is widely expected to raise interest rates by three-quarters of a point.

The MSCI All-World stock index fell 0.3% to its lowest in two months, while gold, another traditional safe haven, rose 0.5% to trade around $1,667.40 an ounce, poised for its biggest one-day rally in more than a week.

Crude oil jumped 2.4% to $92.75 a barrel, while natural gas prices rose, as traders braced for another blow to global energy supplies.

In Asia overnight, Japan’s Nikkei (.N225) fell 1.36% and touched its lowest level in two weeks, while Chinese blue-chips (.CSI300) fell 0.71%, and Hong Kong’s Hang Seng Index (.HSI) lost 1.48% .

The Federal Reserve made headlines in the week that more than a dozen central banks announced policy decisions, including the Bank of Japan and the Bank of England on Thursday.

With traders and investors stepping up their expectations that central banks will raise interest rates to quell persistent inflation, global bond yields have soared in recent months.

But as tension over Russia has grown, so has the demand for the relative safety of government debt.

German 10-year bond yields fell 7 basis points to around 1.873%, on track for their biggest one-day drop in a month, after hitting their highest level since early 2014 the day before.

The 10-year Treasury yield touched 3.604% on Tuesday for the first time since April 2011 before easing back to 3.535% after Putin’s comments.

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Additional reporting by Kevin Buckland in Tokyo. Editing by Kim Coogle, Mark Potter, William MacLean

Our Standards: Thomson Reuters Trust Principles.

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